Obama's Geek Economist

Obama's Geek Economist

Rather than globalization, Goolsbee believes, “the change in the demand for skills and use of technology” has reduced average Americans’ economic security. Then is the problem an unwillingness to change and acquire new skills–a kind of laziness? “Since as far as hours worked, people here are working more than in any other major economy, that’s really not the issue,” he says. “Americans are no lazier than any other people. It’s been the long-standing trend that the U.S. economy has been much more focused on areas involving high human capital.” At the same time it’s mistaken, he insists, to fear some automated dystopia “where everybody below the 50th percentile loses their jobs,” because in a growing economy, a range of skills will always be needed. “When productivity increases in any given segment of an economy, wages rise there, and this spills over into relatively unskilled workers’ pay. Picture a hospital, where there are high-skilled doctors, high-tech machinery needing experts to run it, middle-skilled nurse practitioners, and low-skilled people working in the cafeteria.”

However, he continues, the trends of recent times have been disturbing: “The inequality and stagnation of incomes for 75 to 85 percent of ordinary Americans is a massive problem.” Without income mobility and more investment in education, America could become a permanently stratified society. “Hence, the central issue confronted by Obama’s economic program is, How do we address the squeeze on ordinary Americans? Because the barriers could become impermeable.”

Creative Destruction“In 1910,” Goolsbee says, “if someone could have gone back and told people then how many phone lines would exist today in the U.S., they’d have responded that that was physically impossible, because every American would need to be a telephone exchange operator. That few switchboard operators exist today, nevertheless, isn’t a sign that all those people are unemployed. The labor economist Alan Krueger at Princeton has studied what share of the highest-paying occupations are occupation codes that didn’t exist in the 1980 census. The figure is very substantial. There’s always job churn.” Continual job destruction and creation, Goolsbee insists, is healthy.

Where might future jobs come from, though? “There’s a joke within economics that 40 years from now every economist will be a health-care economist, because if you simply extrapolate from the current trend, the whole economy will be health care.” While we currently think of health care as a cost of business, Goolsbee continues, he can imagine it becoming a central driver of the economy. “Firstly, these are great engines of growth. Secondly, they make us healthy–and what’s better than that? Spending on medical research and science, by any crass economic calculation, has a massive payoff, because if you put any value on life–for instance, if you’ve medicine that keeps people alive for an extra two years–the implicit value of that is great. I could easily see some emerging combination of medical science, biotechnology, and computing as the foundation of much of our economic growth going forward.”

Goolsbee pauses, then says: “That’s why the last eight years’ degradation of the budgets for science and its general politicization are so upsetting. The government’s commitment to investment in advanced training of our own people has plummeted, so now something like two-thirds of those gaining science and engineering PhDs here aren’t U.S. citizens. For many years America led globally in the percentage of 25-year-olds with college degrees. Now the U.S. is 31 in the world–right behind Bulgaria and right above Costa Rica. The problem for countries with skill levels between Bulgaria and Costa Rica is that 20 years from now they’ll also have income levels between those countries.”